OVERVIEW
The Company's strategy is to apply its expertise in energy and transportation infrastructure industries to increase market share, increase profitability and enhance shareholder value through:

· Organic growth as well as a continued disciplined approach to the acquisition of well-managed companies and properties

· The elimination of system-wide cost redundancies through increased focus on integration of operations and standardization and consolidation of various support services and functions across companies within the organization

· The development of projects that are accretive to earnings per share and return on invested capital

The Company has capabilities to fund its growth and operations through various sources, including internally generated funds, commercial paper facilities and the issuance from time to time of debt securities and the Company's equity securities. Although volatility in the capital markets has recently increased significantly, the Company continues to issue commercial paper, although at higher interest rates, to meet its current needs. At this time, accessing the long-term debt market may be more challenging and result in significantly higher interest rates. For more information on the Company's net capital expenditures, see Liquidity and Capital Commitments.

The key strategies for each of the Company's business segments, and certain related business challenges, are summarized below. For a summary of the Company's business segments, see Note 16.

Key Strategies and Challenges
Electric and Natural Gas Distribution
Strategy Provide competitively priced energy to customers while working with them to ensure efficient usage. Both the electric and natural gas distribution segments continually seek opportunities for growth and expansion of their customer base through extensions of existing operations and through selected acquisitions of companies and properties at prices that will provide stable cash flows and an opportunity for the Company to earn a competitive return on investment. The natural gas distribution segment also continues to pursue growth by expanding its level of energy-related services.

Challenges Both segments are subject to extensive regulation in the state jurisdictions where they conduct operations with respect to costs and permitted returns on investment as well as subject to certain operational regulations at the federal level. The ability of these segments to grow through acquisitions is subject to significant competition from other energy providers. In addition, the ability of both segments to grow service territory and customer base is affected by the economic environment of the markets served and significant competition from other energy providers, including rural electric cooperatives. The construction of electric generating facilities and transmission lines are subject to increasing cost and lead time, as well as extensive permitting procedures.

Construction Services
Strategy Provide a competitive return on investment while operating in a competitive industry by: building new and strengthening existing customer relationships; effectively controlling costs; retaining, developing and recruiting talented employees; focusing business development efforts on

project areas that will permit higher margins; and properly managing risk. This segment continuously seeks opportunities to expand through strategic acquisitions.

Challenges This segment operates in highly competitive markets with many jobs subject to competitive bidding. Maintenance of effective operational and cost controls, retention of key personnel and managing through down turns in the economy are ongoing challenges.

Pipeline and Energy Services
Strategy Leverage the segment's existing expertise in energy infrastructure and related services to increase market share and profitability through optimization of existing operations, internal growth, and acquisitions of energy-related assets and companies. Incremental and new growth opportunities include: access to new sources of natural gas for storage, gathering and transportation services; expansion of existing gathering and transmission facilities; and incremental expansion of pipeline capacity to allow customers access to more liquid and higher-priced markets.

Challenges Energy price volatility; natural gas basis differentials; regulatory requirements; ongoing litigation; recruitment and retention of a skilled workforce; and increased competition from other natural gas pipeline and gathering companies.

Natural Gas and Oil Production
Strategy Apply technology and leverage existing exploration and production expertise, with a focus on operated properties, to increase production and reserves from existing leaseholds, and to seek additional reserves and production opportunities in new areas to further diversify the segment's asset base. By optimizing existing operations and taking advantage of new and incremental growth opportunities, this segment's goal is to increase both production and reserves over the long term so as to generate competitive returns on investment.

Challenges Fluctuations in natural gas and oil prices; ongoing environmental litigation and administrative proceedings; timely receipt of necessary permits and approvals; recruitment and retention of a skilled workforce; availability of drilling rigs, materials and auxiliary equipment, and industry-related field services; inflationary pressure on development and operating costs; and increased competition from other natural gas and oil companies.

Construction Materials and Contracting
Strategy Focus on high-growth strategic markets located near major transportation corridors and desirable mid-sized metropolitan areas; strengthen long-term, strategic aggregate reserve position through purchase and/or lease opportunities; enhance profitability through cost containment, margin discipline and vertical integration of the segment's operations; and continue growth through organic and acquisition opportunities. Ongoing efforts to increase margin are being pursued through the implementation of a variety of continuous improvement programs, including corporate purchasing of equipment, parts and commodities (liquid asphalt, diesel fuel, cement and other materials), and negotiation of contract price escalation provisions. Vertical integration allows the segment to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to adequate quantities of permitted aggregate reserves being significant. A key element of the Company's long-term strategy for this business is to further expand its presence, through acquisition, in the higher-margin materials business (rock, sand, gravel, liquid asphalt, ready-mixed concrete and related products), complementing and expanding on the Company's expertise.

Challenges The economic slow-down has adversely impacted operations, particularly in the private market. This business unit expects to continue cost containment efforts and a greater emphasis on industrial, energy and public works projects. The Company is experiencing significant increases in the cost of raw materials such as diesel, gasoline, liquid asphalt and steel. Increased competition in certain construction markets has also lowered margins.

For further information on the risks and challenges the Company faces as it pursues its growth strategies and other factors that should be considered for a better understanding of the Company's financial condition, see Part II, Item 1A
- Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2007 Annual Report. For further information on each segment's key growth strategies, projections and certain assumptions, see Prospective Information. For information pertinent to various commitments and contingencies, see Notes to Consolidated Financial Statements.

Earnings Overview
The following table summarizes the contribution to consolidated earnings by each
of the Company's businesses.

                                               Three Months Ended             Nine Months Ended
                                                  September 30,                 September 30,
                                                   2008           2007           2008          2007
                                                   (Dollars in millions, where applicable)
Electric                                   $        6.8      $     5.7     $     15.1     $    13.0
Natural gas distribution                           (3.4 )         (4.5 )         18.5           1.1
Construction services                              16.3           13.7           41.2          33.9
Pipeline and energy services                        5.7            9.2           19.7          21.1
Natural gas and oil production                     57.5           33.2          179.8          99.0
Construction materials and contracting             33.6           50.4           25.2          66.1
Other                                               1.7           (3.4 )          4.9          (6.8 )
Earnings before discontinued operations           118.2          104.3          304.4         227.4
Income from discontinued operations, net
of tax                                              ---           96.8            ---         109.5
Earnings on common stock                   $      118.2      $   201.1     $    304.4     $   336.9
Earnings per common share - basic:
Earnings before discontinued operations    $        .65      $     .57     $     1.66     $    1.25
Discontinued operations, net of tax                 ---            .53            ---           .60
Earnings per common share - basic          $        .65      $    1.10     $     1.66     $    1.85
Earnings per common share - diluted:
Earnings before discontinued operations    $        .64      $     .57     $     1.66     $    1.24
Discontinued operations, net of tax                 ---            .53            ---           .60
Earnings per common share - diluted        $        .64      $    1.10     $     1.66     $    1.84
Return on average common equity for the
12 months ended                                                                  15.5 %        18.7 %

Three Months Ended September 30, 2008 and 2007 Consolidated earnings for the quarter ended September 30, 2008, decreased $82.9 million from the comparable prior period largely due to:

· The absence in 2008 of income from discontinued operations net of tax, largely related to the gain on the sale of the Company's domestic independent power production assets, which were sold in the third quarter of 2007, as discussed in Note 3

· Construction workloads and margins as well as product volumes that were significantly lower at the construction materials and contracting business as a result of the economic downturn primarily as it relates to the residential market

· The absence in 2008 of the gain of $6.1 million (after tax) related to the sale of Hartwell in 2007, reflected in the Other category

Partially offsetting these decreases were:

· Higher average natural gas and oil prices of 37 percent and 53 percent, respectively, and increased oil and natural gas production of 29 percent and 2 percent, respectively, partially offset by higher depreciation, depletion and amortization expense at the natural gas and oil production business

· The absence in 2008 of an income tax adjustment of $10.0 million in 2007 associated with the anticipated repatriation of profits from Brazilian operations as discussed in Note 15, reflected in the Other category

Nine Months Ended September 30, 2008 and 2007 Consolidated earnings for the nine months ended September 30, 2008, decreased $32.5 million largely due to:

· The absence in 2008 of income from discontinued operations net of tax, as previously discussed

· Construction workloads and margins as well as product volumes that were significantly lower at the construction materials and contracting business, as previously discussed

· The absence in 2008 of the gain of $6.1 million (after tax) related to the sale of Hartwell in 2007, reflected in the Other category

Partially offsetting these decreases were:

· Higher average natural gas and oil prices of 29 percent and 78 percent, respectively, and increased oil and natural gas production of 21 percent and 6 percent, respectively, partially offset by higher depreciation, depletion and amortization expense at the natural gas and oil production business

· Increased earnings at the natural gas distributions business, largely earnings at Cascade, which was acquired on July 2, 2007

· Higher construction workloads at the construction services business

· The absence in 2008 of an income tax adjustment of $10.0 million in 2007 associated with the anticipated repatriation of profits from Brazilian operations as discussed in Note 15, reflected in the Other category

FINANCIAL AND OPERATING DATA
Below are key financial and operating data for each of the Company's businesses.

Electric
                                               Three Months Ended            Nine Months Ended
                                                 September 30,                 September 30,
                                                  2008           2007          2008          2007
                                                  (Dollars in millions, where applicable)
Operating revenues                         $      56.0      $    54.0     $   154.1     $   145.7
Operating expenses:
Fuel and purchased power                          19.6           20.3          54.0          52.9
Operation and maintenance                         15.9           16.0          47.4          45.6
Depreciation, depletion and amortization           6.0            5.7          18.1          16.9
Taxes, other than income                           2.2            2.1           6.6           6.4
                                                  43.7           44.1         126.1         121.8
Operating income                                  12.3            9.9          28.0          23.9
Earnings                                   $       6.8      $     5.7     $    15.1     $    13.0
Retail sales (million kWh)                       660.7          703.5       1,946.2       1,945.5
Sales for resale (million kWh)                    58.8           39.2         158.7         130.4
Average cost of fuel and purchased power
per kWh                                    $      .026      $    .027     $    .024     $    .025

Three Months Ended September 30, 2008 and 2007 Electric earnings increased $1.1 million from the comparable prior period largely due to higher retail sales margins, primarily related to the implementation of higher rates in Montana, partially offset by lower retail sales volumes of 6 percent.

Nine Months Ended September 30, 2008 and 2007 Electric earnings increased $2.1 million largely due to:

· Higher retail sales margins, as previously discussed

· Higher sales for resale volumes of 22 percent, largely due to the addition of wind-powered electric generation and higher plant availability

Partially offsetting these increases were higher operation and maintenance costs of $1.0 million (after tax), including higher benefit-related costs, as well as increased depreciation, depletion and amortization expense of $800,000 (after tax), largely related to higher property, plant and equipment balances.

Natural Gas Distribution
                                                Three Months Ended             Nine Months Ended
                                                  September 30,                  September 30,
                                                  2008             2007           2008          2007
                                                    (Dollars in millions, where applicable)
Operating revenues                         $      94.0       $     90.7     $    653.1     $   280.2
Operating expenses:
Purchased natural gas sold                        55.9             53.3          475.9         193.9
Operation and maintenance                         26.9             26.6           82.6          57.8
Depreciation, depletion and amortization           7.4              7.1           21.7          12.0
Taxes, other than income                           4.7              5.9           30.3           9.1
                                                  94.9             92.9          610.5         272.8
Operating income (loss)                            (.9 )           (2.2 )         42.6           7.4
Earnings (loss)                            $      (3.4 )     $     (4.5 )   $     18.5     $     1.1
Volumes (MMdk):
Sales                                              6.4              7.2           53.0          28.4
Transportation                                    24.9             22.7           70.0          29.0
Total throughput                                  31.3             29.9          123.0          57.4
Degree days (% of normal)*
Montana-Dakota                                      70 %             71 %          103 %          93 %
Cascade                                            111 %            102 %          111 %         102 %
Average cost of natural gas, including
transportation, per dk**
Montana-Dakota                             $      9.71       $     5.15     $     8.33     $    6.45
Cascade                                    $      7.80       $     7.60     $     8.03     $    7.60

Three Months Ended September 30, 2008 and 2007 The natural gas distribution business experienced a seasonal loss of $3.4 million in the third quarter of 2008 compared to a loss of $4.5 million in the third quarter of 2007. The decrease in the seasonal loss is largely due to increased transportation volumes and margins as well as higher non-regulated energy-related services.

Nine Months Ended September 30, 2008 and 2007 Earnings at the natural gas distribution business increased $17.4 million due to:

· Earnings of $15.2 million, including a $4.4 million (after tax) gain on the sale of its natural gas management service, at Cascade since the comparable prior period

· Increased retail sales volumes from existing operations resulting from colder weather than last year

· Higher non-regulated energy-related services of $700,000 (after tax)

· Increased transportation volumes and margins

Partially offsetting these increases was increased operation and maintenance expense from existing operations of $1.1 million (after tax), including higher payroll-related and materials costs.

Construction Services
                                             Three Months Ended          Nine Months Ended
                                                September 30,              September 30,
                                                 2008         2007           2008        2007
                                                             (In millions)
Operating revenues                         $    328.5      $ 293.3     $    960.6     $ 793.9
Operating expenses:
Operation and maintenance                       288.0        258.1          848.5       700.4
Depreciation, depletion and amortization          3.3          3.5            9.8        10.5
Taxes, other than income                          9.5          8.5           31.9        24.8
                                                300.8        270.1          890.2       735.7
Operating income                                 27.7         23.2           70.4        58.2
Earnings                                   $     16.3      $  13.7     $     41.2     $  33.9

Three Months Ended September 30, 2008 and 2007 Construction services earnings increased $2.6 million due to higher construction workloads, largely in the Southwest region.

Nine Months Ended September 30, 2008 and 2007 Construction services earnings increased $7.3 million over the comparable prior period. Higher construction workloads were partially offset by lower construction margins and higher general and administrative expense, largely payroll-related.

Pipeline and Energy Services
                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
                                                 2008           2007           2008          2007
                                                           (Dollars in millions)
Operating revenues                         $    134.6      $   102.5     $    423.5     $   327.8
Operating expenses:
Purchased natural gas sold                       97.6           60.9          308.3         216.3
Operation and maintenance                        17.2           17.1           51.4          47.7
Depreciation, depletion and amortization          5.9            5.4           17.4          16.1
Taxes, other than income                          2.9            2.7            8.5           8.1
                                                123.6           86.1          385.6         288.2
Operating income                                 11.0           16.4           37.9          39.6
Income from continuing operations                 5.7            9.2           19.7          21.1
Income from discontinued operations, net
of tax                                            ---             .2            ---            .3
Earnings                                   $      5.7      $     9.4     $     19.7     $    21.4
Transportation volumes (MMdk):
Montana-Dakota                                    8.2            6.6           23.7          21.7
Other                                            29.1           33.5           77.3          83.7
                                                 37.3           40.1          101.0         105.4
Gathering volumes (MMdk)                         26.8           23.5           76.2          68.2

Three Months Ended September 30, 2008 and 2007 Pipeline and energy services experienced a decrease in earnings of $3.7 million compared to the third quarter of 2007 due to:

· Lower storage services revenue of $1.4 million (after tax), largely due to lower storage balances

· Decreased volumes transported to storage of 28 percent

· Increased operation and maintenance cost, including higher legal costs, outside services and payroll-related costs

· Higher depreciation, depletion and amortization expense of $300,000 (after tax), largely due to higher property, plant and equipment balances

Partially offsetting these decreases were increased off-system transportation and demand fees related to an expansion of the Grasslands system, higher gathering volumes of 14 percent and higher gathering rates.

Results in 2008 reflect the absence of operating revenues as well as operation and maintenance expense related to a non-regulated energy-related service project completed in 2007.

Nine Months Ended September 30, 2008 and 2007 Pipeline and energy services earnings decreased $1.7 million largely due to:

· Increased operation and maintenance expense of $2.4 million (after tax), including higher material, outside services, payroll-related and legal costs

· Decreased volumes transported to storage of 35 percent

· Lower storage services revenue of $900,000 (after tax), largely due to lower storage balances

· Higher depreciation, depletion and amortization expense of $800,000 (after tax), largely due to higher property, plant and equipment balances

Partially offsetting these decreases were:

· Higher gathering volumes of 12 percent and higher average gathering rates of $1.0 million (after tax)

· Increased off-system transportation and demand fees, as previously discussed

Natural Gas and Oil Production
                                               Three Months Ended            Nine Months Ended
                                                 September 30,                 September 30,
                                                   2008          2007           2008          2007
                                                   (Dollars in millions, where applicable)
Operating revenues:
Natural gas                                $      121.1     $    86.4     $    379.1     $   276.4
Oil                                                72.0          36.5          198.7          92.3
Other                                                .1            .2             .1            .4
                                                  193.2         123.1          577.9         369.1
Operating expenses:
Purchased natural gas sold                          ---           ---             .1            .3
Operation and maintenance:
Lease operating costs                              21.0          17.6           58.5          48.7
Gathering and transportation                        6.6           5.3           18.5          14.9
Other                                              10.5           8.9           33.1          26.3
Depreciation, depletion and amortization           44.5          33.2          125.5          92.7
Taxes, other than income:
Production and property taxes                      15.5           8.5           45.4          26.7
Other                                                .2            .1             .7            .6
                                                   98.3          73.6          281.8         210.2
Operating income                                   94.9          49.5          296.1         158.9
Earnings                                   $       57.5     $    33.2     $    179.8     $    99.0
Production:
Natural gas (MMcf)                               16,188        15,865         49,280        46,536
Oil (MBbls)                                         729           565          2,067         1,710
Total Production (MMcf equivalent)               20,566        19,256         61,684        56,799
Average realized prices (including
hedges):
Natural gas (per Mcf)                      $       7.48     $    5.45     $     7.69     $    5.94
Oil (per Bbl)                              $      98.61     $   64.54     $    96.09     $   53.94
Average realized prices (excluding
hedges):
Natural gas (per Mcf)                      $       7.84     $    4.51     $     8.02     $    5.35
Oil (per Bbl)                              $      99.60     $   64.64     $    97.01     $   53.98
Average depreciation, depletion and
amortization rate, per equivalent Mcf      $       2.10     $    1.65     $     1.97     $    1.56
Production costs, including taxes, per
net equivalent Mcf:
Lease operating costs                      $       1.02     $     .91     $      .95     $     .86
Gathering and transportation                        .32           .28            .30           .26
Production and property taxes                       .75           .44            .73           .47
                                           $       2.09     $    1.63     $     1.98     $    1.59
. . .